Shell Announces Purchase of Singapore LNG Company Pavilion Energy

Shell Eastern Trading Pte. Ltd., a subsidiary of Shell plc, has entered into an agreement with Carne Investments Pte. Ltd., an indirect wholly-owned subsidiary of Temasek, to purchase 100% of the shares in Pavilion Energy Pte. Ltd. Pavilion Energy encompasses a global liquefied natural gas (LNG) trading business with a contracted supply volume of approximately 6.5 million tonnes per annum (mtpa).

Based in Singapore, Pavilion Energy's global energy operations include LNG trading, shipping, and natural gas supply and marketing activities across Asia and Europe.

“"The acquisition of Pavilion Energy will strengthen Shell's position as a leader in LNG, increasing volumes and enhancing the flexibility of our global portfolio," said Zoë Yujnovich, Shell’s Integrated Gas and Upstream Director. "Acquiring Pavilion's portfolio of LNG offtake and supply contracts will provide additional access to strategic gas markets in Asia and Europe." By incorporating these assets into Shell’s global LNG portfolio, we are well-positioned to derive value from this transaction and address the energy security needs of our customers.”

The acquisition will be incorporated within Shell’s existing cash capital expenditure guidance, which remains unchanged. The deal surpasses the internal rate of return (IRR) hurdle rate for Shell’s Integrated Gas business, contributing to its 15-25% growth target for purchased volumes compared to 2022, as outlined during the 2023 Capital Markets Day.

Portfolio integration will begin following the deal's completion, anticipated by Q1 2025, pending regulatory approvals and the fulfillment of other conditions precedent.

Pavilion Energy’s portfolio consists of approximately 6.5 mtpa of long-term LNG sale and supply contracts. It also includes around 2 mtpa of long-term regasification capacity at the Isle of Grain LNG terminal in the UK, as well as regasification access in Singapore and Spain. Additionally, Pavilion Energy time-charters three M-type, Electronically Controlled Gas Injection (MEGI) LNG vessels and two Tri-Fuel Diesel Electric (TFDE) vessels. The company also operates an LNG bunkering business, with its first vessel slated for deployment in early 2024. However, Pavilion Energy's pipeline gas business will not be part of the acquisition and will be transferred to Gas Supply Pte Ltd (GSPL), a wholly-owned subsidiary of Temasek, before the deal is finalized. Pavilion Energy’s 20% shareholding in blocks 1 and 4 in Tanzania is also excluded from the transaction. Global LNG demand is expected to rise by more than 50% by 2040, driven by industrial coal-to-gas switching in China, South Asia, and Southeast Asia, where LNG will support economic growth. Shell views LNG as essential for the energy transition, replacing coal in heavy industry and power generation, thereby reducing local air pollution and carbon emissions. LNG also offers the flexibility needed in the power system, particularly as renewable energy generation grows rapidly.

Shell aims to expand its LNG business by 20-30% by 2030 compared to 2022, with purchased LNG volumes expected to grow by 15-25% as outlined during the 2023 Capital Markets Day. This acquisition is anticipated to support these growth targets. Through its acquisition of BG, Shell holds the first LNG importing license for Singapore, supplying nearly a quarter of the country’s natural gas needs. For over a decade, Shell has reliably and competitively delivered LNG to Singapore and other Asian markets, trading LNG, crude oil, oil products, and other energy commodities to meet the energy demands of customers across Asia, thereby actively contributing to the region’s energy supply security. Additionally, Shell has been a pioneer in developing LNG as a marine fuel for bunkering in Singapore.